DECEMBER 2017 ISSUE 14.23
Accident rallies broker community Industry comes together to support one of its own /08
NAB fires 20 bankers Thousands of mortgages were approved without meeting lending policies /12
MATT BAULD Why Prospa is the partner of choice for brokers who want to tap into the opportunities in the growing SME market /14
Collective thinking leads to success A two-woman broking team shows how to do diversification right /18
ALSO IN THIS ISSUE ‌ Get the lowdown on credit repair An expert breaks down the options available /21 Damian Brosque Helping a single mother reach her property goals /22 Barry Oxley An industry veteran reflects on its transformation /30
NEWS
IN THIS SECTION
Lenders NAB streamlines loan process for brokers /04
Associations Poor-performing brokers have “lack of direction” /06
Technology Social scoring to complement credit history /10
Regulators NAB to remediate 2,300 home loan customers /12
Brokers Heartbreaking accident rallies broker community /08
www.brokernews.com.au DECEMBER 2O17 EDITORIAL Editor Otiena Ellwand News Editor Miklos Bolza Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION Designer Martin Cosme Production Manager Alicia Chin Traffic Coordinator Freya Demegilio
1 DECEMBER
5 DECEMBER
Anti-Money Laundering Conference
How to convert leads online
The program will explore the systems and processes that need to be in place for organisations to better understand their customers and the volume of data they are managing in today’s heightened climate of risk
The MFAA presents a lunchtime webinar on converting online leads, turning cold leads into warm leads, and increasing your conversion rate
SALES & MARKETING Sales Manager Simon Kerslake Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
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ADVERTISING ENQUIRIES
6 DECEMBER
7 DECEMBER
Networking breakfast
AFG Awards – Sydney
Suncorp is hosting a networking breakfast for Connective brokers in both Adelaide and Perth on 6 December. Get to know the bank’s BDMs and their local teams
AFG will unveil its Top 20 groups and Top 40 loan writers in NSW and ACT, along with a host of other awards for best performers, at the combined AFG Awards and Christmas function at Doltone House in Sydney’s Hyde Park
Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Bengaluru
13 DECEMBER
22-23 FEBRUARY
Australian Payment Summit
Australian Mortgage Innovation Forum
This inaugural summit in Sydney covers key trends in fintech, and developments in open banking, digital identity, real-time payments and regulatory alignments
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The 2018 summit will take a close look at the impacts of digital disruption, channel adaption, data sharing through CCR, open banking and evolving customer expectations to forecast the homebuying journey in the new year
This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.
NEWS
LENDERS REA ON TRACK TO MEET TARGETS
SYDNEY HAS LOWEST INDICATIVE RENTAL YIELD Source: The QBE Australian Housing Outlook 2017–2020
Indicative house rental yields
growing pool of consumers using realestate.com.au means REA’s home loan and broking arms are due to hit their predicted financial targets, the company says. Over 60,000 people had created a financial profile on the site since the launch of realestate.com.au Home Loans in September, CEO Tracey Fellows said. As a result, the new finance and broking department is on track to deliver on previously estimated targets of $26m–$30m in revenue and $7m–$11m in earnings before tax.
10%
THE
9% 8% 7% 6% 5% 4% 3% 2% 1%
CBA EMPLOYEE CHARGED WITH LOAN FRAUD Melbourne man and former CBA employee has been charged with one count of conspiracy to defraud the bank of $36m. According to ASIC, Andrew Cameron allegedly conspired with others to defraud CBA by providing false documents and information in support of approximately 121 home loan applications. The charges are linked to the hundred-million-dollar loan fraud conspiracy uncovered by ASIC’s investigation into Myra Home Loans. The maximum penalty for the offence is 15 years’ imprisonment. Cameron was not required to enter a plea.
0% ’00
A
“In 2017 we have made a range of changes to make submitting home loan applications easier, simpler and more efficient for brokers and their customers.” Steve Kane General manager of broker distribution, NAB
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’01
’02
’03
’04
’05
’06
’07
’08
’09
’10
Sydney
Perth
Canberra
Melbourne
Adelaide
Darwin
Brisbane
Hobart
Variable rate
’11
NAB STREAMLINES LOAN PROCESS FOR BROKERS The bank has introduced a number of digital tools in what it says is a further commitment to the broker channel has announced a series of changes that will make its digital home loan capabilities more efficient for brokers and their clients. The bank has introduced two online verification tools, IDme and ZipID, which allow brokers to securely collect customer identification from their mobile devices. NAB will also add DocuSign to its suite of tools in 2018 so customers can sign documents from anywhere in the world from their phone or tablet. “We are focused on using smart technology to make it easier for brokers to both collect customer information and submit documentation, simplifying the home loan NAB
process,” said Steve Kane, NAB general manager of broker distribution. These improvements have been rolled out as part of the bank’s ‘Helping You Accelerate’ campaign, which seeks to enhance the home loan experience for both brokers and customers. Brokers will gain access to a variety of digital tools and personalised support from NAB to help guide them through the home loan process and deliver a positive experience to clients. “In 2017 we have made a range of changes to make submitting home loan applications easier, simpler and more efficient for brokers and their customers,” Kane said.
’12
’13
’14
’15
’16
’17 (Year)
The Helping You Accelerate campaign will help brokers get the most out of the support NAB offers by integrating its tools and assistance into a simple step-by-step guide, he added. “It’s yet another way we are showing our commitment to the broker channel.” Over the past 12 months, NAB has rolled out a number of other initiatives to assist brokers, such as its renewed small business offerings for SME clients and the Customer Adviser Broker Program, which saw the bank install support experts in more than 20 branches with the specific remit of onboarding broker clients. “These initiatives are just a few examples of how NAB is listening to the insights of our brokers and continually improving the broker-customer experience. “It’s just one step closer to becoming the bank for brokers,” Kane said.
NEWS
A S S O C I AT I O N S AVERAGE BROKER INCOME DROPS $9,000 average pre-tax salary of mortgage brokers has decreased by $9,000 since September last year, a new report from the MFAA reveals. The industry body’s latest Industry Intelligence Service (IIS) report found that brokers are earning a yearly average of $133,500 from upfront and trail, before costs. This was down from the $142,500 found in the previous IIS survey. Breaking this down, the average gross upfront commission per broker prior to costs is around $77,000, while the trail is around $56,500. THE
ASIC MAY TIGHTEN GRIP ON CREDIT LICENSEES may be given new power to rein in financial services or credit licence holders under investigation, which will allow the regulator to mandate certain actions of businesses with an ACL or AFSL. The three proposals fill gaps in ASIC’s current set-up, which limits the regulator’s capacity to act because of time and resource constraints as well as restrictions around how enforceable undertakings currently work. They would include compelling a firm to cease accepting new clients, halt a business transfer, and more. ASIC
POOR-PERFORMING BROKERS HAVE ‘LACK OF DIRECTION’ One leading industry association mentor says a major hurdle for brokers is the unstructured nature of the job almost one in three brokers
WITH in NSW settling less than
$2m in loans per year, industry support from associations, lenders and aggregators is now more important than ever. These figures come from the MFAA’s Industry Intelligence Report, which showed that 14% of brokers in NSW did not settle a single loan, while 22% settled less than $2m. Zarko Jokic, MFAA business development manager for NSW/ACT, asked how these numbers were possible. “I ponder this question on a daily basis. A lot of what we do at the MFAA is try and reduce that number,” he said at a New Member Welcome Session in
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Sydney on 13 November. MFAA CEO Mike Felton told Australian Broker that the association had invested heavily in minimising the number of new brokers who failed to bring in any loans and who exited the industry in their first year. However, there are challenges, he said. “It’s a tough industry. It takes time to build a book, and it takes time to develop an income stream. Not everybody manages to do it.” A key factor behind the high number of poorly performing brokers is that a lot of new entrants lack direction when resigning from a full-time role and commencing their broking career, Jokic said. “When you leave an environment that has structure, you also
often lose accountability.” He suggested new brokers work with people who could replace this rigid work structure and help keep them on track to meet their targets and benchmarks. “Everything you do is a choice. What I will ask you to do is make a choice of surrounding yourself with people who can make you realise what you set out to do.” Talking to Australian Broker after the session, Jokic said the MFAA had hosted 15 to 20 new-to-industry brokers at these sessions in Sydney alone. Some of the areas in which new brokers have the most difficulty are generating leads and converting one-off conversations into referral partnerships, he said. “If you can get the front end right, the great thing is the resources that the aggregator has can take them a long, long way. Because as soon as you’ve got a lender involved, there’s another set of resources that’s going to help you make the deal happen.”
“It’s a tough industry. It takes time to build a book and it takes time to develop an income stream. Not everybody manages to do it.” Mike Felton CEO, MFAA
NEWS
BROKERS COMPLEXITY INCREASING BROKER VALUE lender Zagga says growing lending complexity has enhanced the value proposition of mortgage brokers for consumers, especially those in the subprime mortgage space. Intermediaries are key to helping potential borrowers find solutions, the firm said in a recent white paper, Reshaping the Lending Landscape: How are today’s trends affecting tomorrow’s market? With major banks tightening credit and alternative lenders increasing market share, brokers are “working harder than ever”, said Zagga CEO Alan Greenstein. MARKETPLACE
ARE MORTGAGES BIASED TOWARDS HETEROSEXUALS? financial products are seen by the LGBTQI community as skewed towards traditional heterosexual relationships, new research has found. The St. George LGBTQI Financial Wellbeing Report surveyed over 800 members of the LGBTQI community, finding that 85% saw financial products to be more suited to straight Australians. The report also uncovered inequality in terms of the two groups’ financial aspirations, with LGBTQI Australians less positive about their financial future. MANY
HEARTBREAKING ACCIDENT RALLIES BROKER COMMUNITY The industry has come together to support one of its own after a recent tragedy hit the family of a veteran broker Australian broker and finance community has come together after a tragic accident changed the lives of Resolve Finance state manager Daniel Johnston and his family. Funds are being raised for Daniel’s wife, Nicole Johnston, who fell down the stairs in her Perth home and broke her neck in August this year. She will spend many months in hospital, and while regaining some movement in her arms and thumbs, she now faces life as a quadriplegic. As part of the Resolve family for more than 15 years, both Daniel and Nicole have had the support of the team and the THE
“It has been humbling to watch not only the Resolve team gather around to support one of their own, but also to see the extent of support from the wider industry.” Don Crellin Managing director, Resolve Finance
broader community, including banking and valuation partners, during these difficult times. “It has been humbling to watch not only the Resolve team gather around to support one of their own, but also to see the extent of support from the wider industry,” Resolve Finance managing director Don Crellin told Australian Broker. Daniel and Nicole were renovating their recently purchased home when the tragedy occurred. Funds are now being raised to refit the house and make it more accessible when Nicole finally returns home early next year.
In an update given in October, Daniel expressed how grateful both he and Nicole were for the assistance currently being offered. “She is aware of all the support she has out there and is truly thankful, as am I. Thank you to everyone for all their love and support,” he said. Over $28,000 had been raised in the online campaign at the time of writing. “It’s truly been incredible, not only the number of cash donations but also many industry colleagues and partners have come forward with items of significant value that can be auctioned on the evening,” Crellin said. Another group, the Independent Finance Brokers Forum, fundraised $4,000 for the family through a raffle and auction at its Christmas party on 16 November.
VV$40,614,829,064 AVERAGE VALUE OF A BROKER’S HOME LOAN BOOK HIGHEST IN WA Source: MFAA Industry Intelligence Service
For the period October 2016–March 2017 50,000,000 45,000,000 40,000,000
31,157,831
37,719,599
5,000,000
28,386,565
39,519,333
46,158,353
32,879,547
15,000,000 10,000,000
37,648,301
25,000,000 20,000,000
39,601,699
35,000,000 30,000,000
NT
Total nationally
0 NSW & ACT
VIC
QLD
WA
SA
Value of loan book per broker
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TAS
NEWS
TECHNOLOGY
WARY BANKS TO ENTER FINTECH WATERS larger financial institutions have traditionally stayed out of the fintech space, BRICKX CEO Anthony Millet said this could soon change. “I don’t think the banks have really played much in this space because it’s disruptive and it’s easier for them to not necessarily add fuel to the fire or to accelerate that disruption,” he said at the Millennial 20/20 conference in Sydney. With new legislation making it easier for start-ups to enter the market, he suspects banks will prove keen to participate. WHILE
SOCIAL SCORING TO COMPLEMENT CREDIT HISTORY A new fintech will grade consumers’ online habits and lifestyle to deliver a unique loan auction experience via brokers and lenders new fintech is making it possible to combine credit scores and an optional social score to get better rates through lenders and finance brokers. The auction-style platform called Lodex lets individuals share these scores anonymously, set up an auction from their smartphone, and watch the bids come in. It will be free for consumers. The social score is the first of its kind in Australia, measuring individuals out of 1,000 using 12,000 points of data compiled from the consumer’s online life. While the concept is new here, it has been used in other countries, including Singapore, India and the Philippines, said Lodex co-founder and director Michael Phillipou. A
“What has been shown when used offshore is it’s a proxy for credit scoring. It’s not looking for personal information; it’s considering metadata. In order to participate, the consumer needs to give permission to the algorithm to access their primary email,” he said. This information is gathered through an algorithm created by Lodex’s partner, Lenddo, and will complement people’s existing credit scores or give those who may be locked out of market access to credit. Lodex allows consumers to supply a lot more information, which makes it stand out from other auction sites in Australia, Phillipou said. “We can literally deal with any
market participant, and our aim is to do that: to be a complementary acquisition channel for brokers as well as lenders, all done in confidence in a secure environment.” Australian lenders don’t currently consider social scores in loan applications, but Phillipou expects that to change. “There’s plenty of evidence to suggest offshore that it’s adding a lot of value and giving more insights into a consumer and what they’re really like as a borrower.” Lodex aims to work with lenders to demonstrate the value that social scoring can add to the loan application process, he said. The fintech offers home loans, car finance and personal loans and has signed up a number of lenders, as well as over 80 accredited mortgage brokers. Lodex was launched in January, and most brokers have come on board in the last few months. Phillipou said the start-up had been “overwhelmed with interest”.
FINTECHS GROWING REVENUE SUBSTANTIALLY
Median fintech post revenue growth year-on-year
6%
208%
10%
Nil growth
20%
1–100%
24%
101–300% 301–700%
14%
>700%
24% June 2017 vs June 2016
0%
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5%
10%
business lender Prospa has reached the milestone of half a billion dollars in loans to over 12,000 SMEs across Australia. Hitting its sixth year, the company has managed to secure over $50m in equity and debt funding in 2017 alone, including a $25m equity round in February and an additional $20m of debt funding in July. Prospa has also doubled the size of its loan book over the past 12 months while growing its team by more than 50% to 150 staff. SMALL
Source: EY FinTech Australia Census 2017
Revenue decline
FINTECH FIRST TO HIT $500M IN SME LOANS
15%
20%
25%
30%
LENDING FINTECHS SHAPING AUSTRALIAN FINTECH SECTOR Source: EY FinTech Australia Census 2017
Biggest competitors (excluding none)
36%
29%
27%
7%
Incumbents
Other fintechs in Australia with a similar offering
Overseas fintechs with a similar offering
Other
Type of fintech (multiple responses) 30%
Wealth and investment 23%
Lending Data analytics/ big data
18%
Payments, wallets and supply chain
16%
Asset management and trading
11%
Regtech
10%
Business tools
10%
Marketplace-style/ peer-to-peer solution
10%
Identity, security and privacy
6%
Blockchain/distributed ledger solution
5%
Insurance/insurtech
5%
Accelerator/ venture capital
5%
Crowdfunding/ fractionalised investing
5%
Challenge/neobank
4%
Digital/crypto currencies and exchanges
4% 9%
Other 0
5%
10%
15%
20%
25%
30%
35%
WESTPAC CONSIDERS ‘BEST INTERESTS’ OF BROKERS an interview with Australian Broker, Westpac’s GM of third party distribution Tony MacRae said the bank’s focus would remain on the ‘‘best interests” of consumers and brokers, especially around helping more people into the property market. “We’re proud to take a leadership position on responsible lending and will continue to build simple tools and provide education and training to make it easier for brokers to understand their customers’ needs and requirements,” he said. Digital innovation and simplification are a key priority moving forward, MacRae added, and the bank is constantly seeking new ways to streamline the home loan process. IN
NEWS
R E G U L AT O R S
‘THE BANK TAX IS DEAD’ controversial SA bank tax has been shot down for a second time in the Senate. “For all intents and purposes, the bank tax is dead,” Premier Jay Weatherill said. In the government’s defeat, Treasurer Tom Koutsantonis said of the banking industry: “The big banks have closed more than 30 branches in South Australia in recent years, and less than two weeks ago NAB announced it would sack a further 6,000 workers on the same day it recorded a profit of $6.6bn.” LABOR’S
NAB TO REMEDIATE 2,300 HOME LOAN CUSTOMERS The bank has also terminated 20 bankers after thousands of mortgages were approved without complying with NAB’s lending policies has commenced a remediation program for some of its customers following the revelation that around 2,300 home loans provided since 2013 may have been submitted without accurate customer information and/or documentation, or correct information in relation to NAB’s Introducer Program. “What occurred was unacceptable. We have investigated this matter thoroughly, and as we have always said, whenever we find issues we will investigate them, fix them, and hold people to account – and we did,” said NAB’s chief customer officer of consumer banking and wealth, Andrew Hagger. As a result of NAB’s review, 20 bankers in NSW and Victoria NAB
INVESTORS WARNED ABOUT VACANT HOMES Victorian Labor Government has fired a warning shot at property investors who leave their homes or apartments vacant for too long, saying they should sell or rent them or be penalised with a new incoming property tax. Overall, more than a thousand properties are vacant in the City of Yarra, 1,700 are empty in Moonee Valley, and over 2,500 are unused in the City of Melbourne. THE
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had their employment terminated; others are no longer employed by NAB, and an additional 32 bankers had consequences applied, including the reduction of remuneration. NAB first became aware of the matter in October 2015 and advised ASIC in December 2015 after an initial high-level review. Since then, NAB has provided regular updates to ASIC on the progress of its investigation. NAB has commenced writing to around 2,300 customers – many of whom live overseas – asking them to participate in a detailed review of their loan, which may include verification of documents submitted at the time of their home loan application. Affected customers may be offered
compensation as appropriate. NAB has engaged with ASIC to ensure the remediation program provides fair outcomes for customers. The remediation program has been designed with reference to the methodology applied by the Financial Ombudsman Service, and NAB’s standard approach to compensating customers. NAB says it will engage an independent expert to undertake regular audits of the remediation program, and will update ASIC every two months on its progress. “I want to assure all of our customers that we have improved our systems, processes and programs as a result of what occurred here,” Hagger said. This includes changes to NAB’s Introducer Program, including enhanced governance and eligibility criteria. Customers who receive letters to participate in the remediation program are encouraged to contact NAB on the phone number provided to them.
GROWTH IN NEW RESIDENTIAL LOAN SETTLEMENTS BY BROKERS, OCT 2016–MAR 2017 Source: MFAA Industry Intelligence Service, Oct 2016–Mar 2017
NSW & ACT
New loans settled Loan book
VIC
4.3%
0.1%
3.6%
-1.0%
5.3%
QLD WA SA TAS
-8.1%
2.4%
-10.5%
4.6%
0.2%
NT Total value of new home loans settled
7.4%
2.9%
1.2%
4.9% 4.1% 4.9%
-10% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
TECHNOLOGY UPDATE
NEXTGEN.NET CIO TALKS TRAILBLAZING TECHNOLOGICAL CHANGE… AND BIDS FAREWELL For over 20 years Andrew Morrison has been at the cutting edge of the rollout of innovations that now preserve the primacy and currency of the Australian mortgage industry. As NextGen.Net chief information officer, Morrison joined the company at an early stage and has been instrumental in steering its strategic direction, and in turn the industry’s digital evolution. On the eve of his retirement Morrison provides a rare glimpse inside the culture of the organisation driving the sector’s automation game plan. Longevity, he says, which translates as “context, through experience and maturity”, is one of NextGen.Net’s key strengths. Welcoming new players to the market, Morrison says: “It’s great to see new entrants in the Australian market. It’s a real validation of the strength of the broker channel, and it keeps us on our toes, ensuring we continue to evolve and enhance our value proposition. “It’s not difficult to come up with part of the solution,” he says, “but for us it’s about understanding how all the moving parts and platforms marry together to benefit our customers; how other solutions integrate most efficiently with ours. And then the most important part of the puzzle – the less exciting pieces: the compliance, the enterprise-level delivery, the process and procedures, the resilience and the robustness. “These things take time and market experience to put in place. It’s something we focus on at NextGen.Net, and this has earned us the reputation for excellence as the market leader. Morrison’s association with NextGen.Net founder and CEO Adrian Macleod dates back to the company’s inception. He was a former customer before becoming an employee, and has seen the company grow to nearly 150 staff. “Adrian and I went through the tech boom of the 2000s. There was wall-to-wall glitz and glamour. We’d see all these guys with their flash new cars and joke that the moment we installed a
Andrew Morrison
pinball machine in the office was the moment that marked the start of the end. We obviously never got caught up in it and maintained our focus,” he laughs. “We saw a lot of people enter the market and then disappear. We’re seeing a similar environment now, where all too often some solutions are all smoke and mirrors – lots of colourful offerings that are basically websites with people rekeying information behind the scenes into the legacy systems they are trying to disrupt.” Prior to entering the finance industry Morrison had a rather colourful career, which included six months on a research station in Antarctica and playing a body double for Harrison Ford on the film set of Indiana Jones and The Temple of Doom. He laughs at the memory and admits feeling uncomfortable about talking about himself. “I’ve been lucky in my life,” he muses. “Things have worked out well, and I’ve had some interesting experiences. If I was to contemplate how they have
influenced me, I guess there is an element of being fairly relaxed and not overawed by situations or people. “We of course respect our clients’ views, but we don’t subscribe to the simplistic notion of the customer always being right. We believe it’s our role to help our customers develop the best solution, and sometimes their views alter after they understand the different options available. “We are famous for challenging our customers, not just agreeing in order to retain their business. There are jokes about consultants receiving vast sums of money just to say what the client already knows. We never do that. Our philosophy is that our client values our expertise because we’ve got runs on the board, and they expect us to voice our opinion.” Morrison says the culture at NextGen.Net is an extension of this. He talks of the lack of a hierarchy, and open and frank dialogue in the office, which he says promotes a safe environment in which creativity and productivity can flourish.
He was a leader in the initiation of electronic lodgement of home loans in Australia through the Trident group project – three broker groups who instigated a proposal for standardised loan lodgement to lenders electronically. He says from the time he first joined the NextGen.Net team the company’s clear-cut goal has always been to deliver smarter solutions that create quality at the point of sale, increase efficiencies, improve service levels and dramatically reduce costs. He is chuffed that today ApplyOnline is the leading electronic lodgement solution, with 97% of Australian mortgage brokers and over 60 Australian lenders utilising the platform. Although reluctant to talk directly about his own contribution to this, he alludes to it when speaking of his pride in NextGen.Net’s achievements. “We can look back over the last few years and see enormous change in terms of electronic lodgement and market changes, and know that we are an intrinsic part of that. Our solutions have made a tangible contribution to the betterment of the industry, and that’s both measurable and demonstrable. “In a lot of instances your work becomes just another cog in the great machinery. In NextGen.Net’s case, we can all see where we fit and what role we play. The people at NextGen.Net are second to none, and I’m proud to say the experience I have gained personally is well retained by our fantastic team. “I’m always pleased to hear the classic story we hear over and over – that a lending institution is entering the broker market and they’ve been told they need to talk to NextGen.Net in order to get into the market properly. It always makes me proud. “Progressive thinking is part of my Kiwi DNA,” Morrison laughs. He adds that he will enjoy returning to New Zealand to spend his retirement “occasionally” reflecting on his successes in Oz. “It’s been a fantastic ride,” he says.
FE AT URES
SPECIAL REPORT
SMALL BUSINESS, BIG OPPORTUNITIES Small business lender Prospa has captured a huge swathe of the SME market, but there are still two million more looking for finance. Prospa’s Matt Bauld explains how the online lender is helping brokers realise the many opportunities in this thriving market
KEY BUSINESS METRICS
$500M
Loans delivered to date
12,000
Small business owner customers
150
Staff around Australia
5,000+
Brokers registered as referral partners
$25,000
Average loan size
9.8/10
Customer satisfaction on independent review site Trustpilot
80%
Repeat customer rate
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you go for a meeting at the Prospa headquarters, you may get an invitation to convene at the pet shop, the salon or the diner. At the small business lender’s newly renovated space in Sydney, each glass-walled boardroom is named after common small businesses it provides funding to, making each meeting a friendly reminder of who the company serves. Prospa has been in the online small business lending world for six years now, so while it still looks and feels like a youthful, energetic start-up, it has settled down and established itself in the industry. “The biggest change for Prospa is we’ve grown up,” says Matt Bauld, general manager of sales and business development. “We were five or six people with a massive goal to change the way small business lending was done back then, and now we’re 150 people. We run a big organisation.” Prospa has lent half a billion dollars in loans to 12,000 businesses since it was founded in 2012. Over the past 12 months it has doubled the size of its loan book, and the size of its team has increased from 90 to 150 people. With a trove of customer data, a savvy online presence and a 5,000-strong intermediary network, Prospa has developed a thorough understanding of the small business market and has used this knowledge and data to better serve clients and the brokers who bring them in. “We’ve been able to validate decisioning over years now and IF
really understand how we can say yes more often to a small business that’s coming to us looking for a specific cash flow requirement,” Bauld says. Its intermediary partners, most of whom are brokers, have played a significant part in getting Prospa’s name out there and connecting the small business community to credit. Before Prospa was established, small business owners could not access capital unless they had an asset to put up as security. They often turned to the ‘Bank of Family’
every year,” Bauld says. “There’s so much to do … the opportunity for brokers is so big that we want to work with them, we want to train them, we want to get them out marketing, making sure they utilise the right tools, that they’re online and realise this opportunity with us,” he says. Mhairi MacLeod, owner of Astute Ability Finance Group, is one broker who has seized on this opportunity and has educated her SME borrowers about Prospa’s service offering. “This space is growing rapidly, and there are so many SMEs out there; if they only knew this product was available they could grow and expand,” she says. What makes Prospa stand out is its staff ’s “willingness to think beyond just the standard deal, and their understanding of the SME market, their understanding of small start-up businesses
“We want to work with [brokers], we want to train them, we want to get them out marketing, making sure they utilise the right tools … and realise this opportunity with us” Matt Bauld, Prospa or mainstream lenders, but the options were limited, Bauld says. That’s changing as a result of lenders like Prospa, and because more mortgage brokers are feeling comfortable about writing commercial loans for the SME market. According to the MFAA’s latest data, 2,650 brokers wrote a commercial loan between October 2016 and March 2017, an increase of 11.5% from the six months prior. But there’s still a huge gap that needs to be filled. “There are 2.1 million SMEs in Australia. We believe that 40% of those are looking for finance
and cash flow”, she says. Prospa offers business loans of between $5,000 and $250,000, with terms from three to 24 months, and repayments can be made daily or weekly. It uses a smart proprietary technology platform to assess the health of a business and determine its creditworthiness. It accesses information from various feeds, including banking and transaction data and public social media and review forums, to get a more holistic view of the business. In many cases, this means customers don’t have to
Matt Bauld, general manager of sales and business development, Prospa
submit a single physical piece of data. Applications can therefore take just 10 minutes to complete, and clients can get an approval in as little as 13 seconds, with funding possible within 24 hours. “And that’s what small business operators want. They don’t want to wait 10 days or a month for a bank to come back and give them a slow no. They want a fast yes,” MacLeod says. Making it easy Prospa is committed to nurturing and growing its intermediary partner channel. After all, 75% of its loans are originated by them. “We want to build our brand,
but our channel business always supersedes our direct aspirations,” Bauld says.
Finsure, eChoice and LoanKit, among others, and has a new aggregator partnership in the works.
“This space is growing rapidly and there are so many SMEs out there; if they only knew this product was available, they could grow and expand” Mhairi MacLeod, broker Prospa’s done this by establishing strong relationships with aggregators like AFG, Connective,
After working with a pilot group of about 25 brokers, Prospa launched a new version
of its loan portal incorporating their feedback, which now tracks conversion rates and shows the progress of every transaction from end to end, keeping brokers in the loop. Bauld says he has a team of 22 people on the ground across the country who are dedicated to helping brokers retain and service their small business customers. This includes a team of four people who are solely responsible for onboarding new brokers and setting them up for success. “We’re about making broker firms more sustainable, and we’re really passionate about that,” Bauld says. www.brokernews.com.au
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Prospa provides partners with a lead capture tool that they can embed on their websites to capture enquiries from any business owners who may be surfing for funding opportunities at midnight – a common practice among time-poor business operators, Bauld says. It also offers partners a suite of marketing strategies and material, including web banners and EDM articles that they can use to educate and inform their customers. Prospa’s support structures and robust set of tools seem to be working. In the last financial year, 400 specialist mortgage brokers were able to diversify by completing and monetising a commercial SME loan with Prospa, Bauld says. As he points out, brokers are in a unique position to talk to SMEs about Prospa’s products. “They can relate to the product based on the fact that they are a small business, which makes it easier for them to go, ‘There is a real opportunity. I have it; I’ve seen it in my business’, and then to be able to at least start and initiate conversations with a customer,” he says. For Paul Stone, joint CEO of HomeSec Business Finance – a funder of one- to six-month business loans that require real estate security – partnering with Prospa has meant his business can refer clients it can’t help itself to a like-minded company it trusts. Prospa and HomeSec don’t compete for clients; instead they complement one another’s offerings, Stone says. When a successful bakery business in Ballarat came to Stone with a desperate need for an $80,000 loan that he couldn’t assist with, he referred it to Prospa. “We gave them the loan scenario and one of their team jumped on it right away,” he says. “They were very open with every stage of the process. They met the client’s expectations and they got the loan funding to them the very next day. We were super impressed. That single thing really clinched the deal for us. Finally we found a company that works alongside the same principles that we do, and that gives you a ton of confidence.” 16
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Mhairi MacLeod, principal broker, Astute Ability Finance Group
A tipping point As a pioneer in the online small business lending space, Prospa has helped raise the profile of fintech, and its broker partners have assisted with this. “The broker market has helped the evolution of fintech by basically starting to talk to more and more customers about its validation points, where it actually assists the customer and how they can use this new change to their advantage,” Bauld says. Fintech used to be something of a “scary word” a few years ago, with many banks and large businesses dismissing it, he says. Now it’s reached a tipping point, with those same companies now scrambling to partner with the latest fintech or create their own. “I think everyone is embracing it; everyone is trying to work out their play. … Most big businesses, as well as small, are really going, ‘How do I get involved?’” he says. For brokers, that answer should be easy: just ask Prospa. AB
Paul Stone, joint CEO, HomeSec Business Finance
VALUE OF NEW COMMERCIAL LENDING SETTLED BY BROKERS Source: MFAA Industry Intelligence Service survey
Total value of new commercial, business, asset or equipment finance lending settled in each state and territory over the period Oct 2016–Mar 2017
NT
$4,668,186 QLD
$1,090,320,424 WA
$753,504,881 SA
$379,357,966 NSW & ACT
$3,395,525,051 VIC
$2,268,990,913 Total value of new commercial lending
$7,902,933,892
TAS
$10,566,471
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BUSINESS PROFILE
BUILDING COMMUNITY WITH BROKING Thomas Magdalene Finance Group won Brokerage of the Year – Diversification at this year’s AMAs, but as the group’s two-woman team tells Australian Broker, its success comes from more than just its multipronged approach to finance SPONSOR’S MESSAGE La Trobe Financial has long embraced diversification as core to its strategy. We have one of the broadest loan product suites in the market, one of the broadest funding profiles of any specialist lender, and we have created highly diversified portfolios for our investors. In discussions with brokers, we like to focus on the benefits to any business that can accrue from sensible and measured diversification. The addition of commercial lending to a predominantly residential broking business, for example, can open new revenue lines that can increase profitability and market share. We have also seen many examples that highlight the importance of diversification. Consider broking businesses set up specifically to write one particular product. We have seen these businesses grow exponentially, and watched as their brokers have risen through the ranks, winning awards for volume and growth in the industry. Unfortunately, success was not sustainable for many of these businesses because when lender supply lines were cut unexpectedly the broker’s own supply capabilities evaporated, along with their business plans. Case studies of markets that have changed significantly over the past 12 months, and which may have disrupted business models include the following:
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Cory Bannister, vice president and chief lending officer, La Trobe Financial
yy yy yy yy yy yy
SMSF loans Non-resident loans Development finance Commercial loans Investment loans Interest-only lending
We strongly believe diversification to be one of the most important fundamentals of any investment, and arguably, a finance broking business is just that, an investment. Therefore a strategy to diversify should be seriously considered in order to safeguard a broker’s business. Specialist lenders can make diversification easy.
Other lenders may require finance brokers to sit a test or hold off on lodging applications until they can be formally accredited (when convenient for the lender in question). However, at La Trobe Financial accredited brokers are able to write all of our products without delay. We use the same forms and documents and follow the same approval processes, ensuring that brokers who are not so familiar with a particular product can easily adapt, hence there is no need for any additional accreditation procedures.
name Belinda Gibson chose to bestow on her brokerage is perhaps the most suitable way to sum up her business ethos. Her company is called Thomas Magdalene Finance Group. Thomas and Magdalene are Gibson’s children’s middle names. They are named after two people who had a major influence on her and her husband’s lives – her husband’s brother, Luke Thomas, and her grandmother, Gladys Magdalene. For Gibson, naming her company after her children and their namesakes was just another way of honouring the importance of family and emphasising her philosophy that finance is about people as much as it is about figures. With those founding roots, it’s no surprise that customer service, community, advocacy and relationships are some of the areas in which TMFG thrives. At the Australian Mortgage Awards on 27 October, just over a year since the company was founded, TMFG won the Bluestone Brokerage of the Year –Diversification award for its multipronged approach to finance. But Gibson says there’s more to her brokerage’s success than its diversification strategy. “It’s a collaboration of not just products and service offerings but what we also do outside of the business that is part of our business: the community projects that we’ve been involved in, the charity donations that we’ve made, and also what we’ve done in the broking industry,” she says. THE
Women empowered It was family that inspired Gibson to start her broking business in March 2016 after 14 years at Westpac in commercial banking. “When you’re working for a corporate you literally work yourself into the ground doing anywhere from between 60 to 70 hours per week, and one of the reasons why I left was to … bring more balance into our family life and not be all
RISE IN COMMERCIAL BROKING Source: MFAA Industry Intelligence Service, October 2016–March 2017
The number of brokers writing commercial loans is growing 2,800
2,700
2,650 2,600
2,500
2,400
From left: Thomas Magdalene Finance Grou director Belinda Gibson and finance broker Evelyn Clark at the 2017 Australian Mortgage Awards
2,375 2,300
about work and to blend it all together,” Gibson says. She hired Evelyn Clark, a recent bachelor of commerce graduate
service offering around being a one-stop shop that focuses on service, integrity and community. They specialise in all aspects of
“It’s a collaboration of not just products and service offerings, but what we also do outside of the business” Belinda Gibson, TMFG from Monash University and an accredited finance broker, to join the team at TMFG. Together they have built their
commercial business and equipment finance, SMSF lending and property development, particularly petrol stations.
On the consumer side, the brokerage also offers home and investment property finance, specialised lending such as SMSF, and personal finance for existing clients. It offers home and contents insurance as a complementary service. It refers specialised equipment finance to an equipment finance broker and refers other professional services, such as financial planning, accounting and legal advice, to selected businesses that they trust. While Gibson already had expertise in these specialised areas from her time at Westpac, she suggests that a broker should listen to their clients and let their needs
2,200
2,100
2,000
Mar 16– Sept 16
Oct 16– Mar 17
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guide the broker’s diversification strategy. “We have focused on growing our diversification offering and referral sources in the past 12 months by adding services through client needs and identifying gaps in our offering. We always ask our clients for feedback, both positive and negative, as all feedback should be taken on board to improve future service, experience and skills,” she says. Clark says once a broker decides how they want to diversify they should speak to BDMs, mentors and experts in those areas. “Use your support networks and ask loads of questions so you can diversify to the same level that you’ve already achieved in your business,” she says. Clark knows this from experience. “I couldn’t have found myself a better organisation in terms of learning and being mentored and being able to work on any transaction, from a simple first home buyer right through to a cash flow deal, so having [Gibson’s] experience has just been really helpful to me,” she says. Community-minded TMFG is unique in more than just its name. For each new loan settled in FY17, TMFG donated $150 to charities selected based on their relevance to one or more of its staff or client community. It now works with Fight MND, Bowel Cancer Australia, Heart Lung Transplant, the Bourke Street Fund, Oz Harvest, Golf Fore A Cause and the Westpac Foundation. Outside of this, both Gibson and Clark volunteer with various sports initiatives. Gibson raised more than $2,000 as a champion runner for Fight MND at the Run Melbourne half-marathon in honour of her stepmother who suffers from the disease. Gibson and Clark created the Ladies Who Lend network, a small group of Victorian brokers who meet once every couple of months to troubleshoot deals and support each other. “It involves encouraging other women to develop their skills, sharing knowledge within the finance broking industry, and having true courage to constantly source new leads, meet new referral sources, and generate conversion so 20
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we can be equally successful,” Gibson says. TMFG is also an advocate of supporting micro and small businesses. It does this by connecting its business clients to one another, or to other companies
bi-monthly newsletters. The idea is that “one of our clients might become one of their clients in the future”, Clark says. In addition to all this, there’s customer service, the cornerstone of any successful business. TMFG has
“We always ask our clients for feedback, both positive and negative, as all feedback should be taken on board to improve future service, experience and skills” Belinda Gibson, TMFG externally that it partners with and trusts. It outsources its own copywriting, web and graphic design to small businesses in the community, and it promotes different clients’ businesses in its
established a process from the enquiry stage through to settlement and beyond that ensures the customer feels informed. “Our engagement with them doesn’t just stop when their loan is
settled. We donate, we celebrate their settlement, and we reward them as well, and we continually make contact with them,” Clark says. They also throw in a few perks along the way. Before this winter began, they sent their clients branded golf umbrellas. “It’s something that’s not expected and clients actually appreciate it,” Gibson says. Achieving success in broking is about more than just the types of lending you offer. It’s about what you provide customers, as well as what you contribute to the industry and the community as an organisation, Gibson says. “Our clients, referral partners, lenders and the businesses that support our business and our team are the reasons behind our success. The feedback we have received from our clients supports our business model, so we know we are on the right path for the future.” AB
OPINION
CREDIT REPAIR: THE FACTS A negative credit file doesn’t mean your client can’t get finance, but some options are better than others, and only one puts money back into your clients’ hands quickly, explains Merrilyn Mansfield of Princeville Credit Advocates A Melbourne broker Princeville sat down with last month talked us through his scenario. He had just put his client with two defaults into a non-conforming loan with Pepper Money. The rate was a 7.69% comparison rate on $400,000. This was costing the client $30,760 in interest per annum, or $2,563 per month. During the conversation, we talked
your client applies for any type of finance with any kind of negative listing on their credit file, there are three options: WHEN
They can obtain the finance they want if they wait until the negative listing has dropped off their credit file, which could take up to seven years. This option may appeal to clients whose negative listings are going to drop off their credit files in two months or less. In this instance, just waiting it out is not a bad idea.
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When choosing to put a client into a high-interest loan, there is also the ethical element to consider if there are better solutions available
They can obtain finance, but only through a second-tier lender with higher upfront application and risk fees and ongoing higher interest charges. This option is good for those clients who have a property lined up and there is urgency to get finance sorted quickly, contingent on the client having the capability to service a high-interest loan.
2
They can get their credit file cleared through a credit repair company, allowing them to go for the most affordable loan on the market. The credit repair option would work best for those who have negative information on their credit file that will stay there for three months to seven years; who have a bit of time up their sleeve to fix their credit score; and who would have a serviceability problem being approved for a high-interest loan. On average, credit repair can be concluded in six to eight weeks.
3
Out of all of these options, credit repair puts money back into the hands of your clients, while the other options will cost your clients, either through delays in entering the property market, continuing their reliance on the rental market, or via interest rate increases.
directly to lenders in more than 50% of cases, mainly to access a wider panel of lenders and get a better deal. The ASIC Review of Mortgage Broker Remuneration also reveals the potential conflicts of interest, pressure and incentives from aggregators and lenders that could lead brokers to put creditimpaired clients into high-interest loans. This cannot be good for the consumer, and the statistics on the prevalence of clawbacks by lenders confirms this. A typical clawback period runs for two years, and only between 4% and 10% of upfront commissions are clawed back by lenders. Clawbacks are therefore a highly effective tool used by lenders to ensure that refinancing to lower interest rates does not occur in over 90% of cases. This is bad news for the creditimpaired consumer, who is placed into a high-interest loan for those two years, paying an extra $32,400 on an average mortgage. I don’t think the consumer thought they were shoring up broker commissions when they sought out
Merrilyn Mansfield Consumer advocate at Princeville Credit Advocates
about how, if the client could clear their credit file using a credit repair service, they could be eligible for a 3.64% comparison rate loan, costing them $14,560 in interest per annum, or $1,213 per month. The difference in interest was a staggering $16,200 per annum, or $1,350 per month. Clearing two defaults off a credit file can cost around $2,500, depending on which credit repair company your client uses. Based on the example above, a $2,500 investment would be recouped by the client in the first 55 days under a more affordable loan. The broker talked to his client about how an extra $13,700 in his pocket each year, for the next few years, would take the pressure off, enabling the family to enjoy life a bit more, reinvest in their mortgage to reduce the amount owing, or spend extra on their kids. When choosing to put a client into a high-interest loan, there is also the ethical element to consider if there are better solutions available. Clients are seeking out brokers rather than going
advice about the best loan product. There is an easy solution to this problem: only suggest a high-interest loan to a client who is aware of all the alternatives and still wants to proceed. Make the client aware that they can refinance at a much lower rate quickly by clearing errors from their credit report, after which they can apply for a low-interest loan. Ignore clawbacks and give the best advice. Aggregators, brokers and lenders will still receive their commissions on the new lowinterest loan. It’s a win-win and a smart solution that puts the best long-term interests of the consumer front and centre when providing advice. AB Dr Merrilyn Mansfield has been a consumer advocate at Princeville Credit Advocates since 2008. At Princeville, she heads the advocacy team and works on complex cases for consumers and companies who have negative, and potentially incorrect, information on their credit files. Mansfield is in her final year of law. www.brokernews.com.au
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
Otiena.Ellwand@keymedia.com.au
A BIG DEAL
Damian Brosque, director of You Finances, explains how he helped a single mother in a desperate situation to lower her existing interest rate, secure finance for an investment property, and settle on time Location: Padstow, NSW
THE FACTS
Loan sizes & terms $450,000 and $350,000 for 25 and 30 years
Goal To purchase investment property
Aggregator Giant Finance Group
Lender Resimac
debt, and a decent credit score. The issue was that her income was inconsistent over the most recent years. We informed her that it was more than likely not going to be a major bank that would facilitate her circumstances due to income and policy. We went with a specialty funder in Resimac. We found that we were able to shave 0.45% off the client’s current interest rate on her owner-occupied residence, which would free up some cash flow to either pay down her owner-occupied debt sooner or aid in providing a more comfortable lifestyle. We were also able to acquire the funds required to complete the client’s investment property transaction. We retained her existing owner-occupied loan term and repayment type as it was, except for refinancing at a better rate. We performed a minor top-up to ensure that both properties remained standalone, and she had full funds to complete on settlement. Along the way, we did request an extension of three days as a safety blanket. Luckily for us, we were able to get the necessary funds together for both the refinance and the top-up, and also the full funds for her investment property by the agreed settlement date. THE TAKEAWAY
not only be approved but to settle in three weeks. Time was not on our side.
THE SCENARIO
We met this client, a single mum working as an aged carer for the NSW Department of Health, through one of our effective online marketing campaigns. She had been sold an investment property in Melbourne by an unnamed financial firm. The firm promised it would locate the property for her and also look after the finance. Unfortunately, upon finding the property and taking her deposit, the company informed her that it could not obtain finance as its preferred funder had declined her application. She would therefore need to acquire it herself or lose her deposit. As you can imagine, she was distraught and stressed and was looking for other resources. Luckily, she came across one of our marketing campaigns at the right time and the right place. We called her and began our initial pre-questionnaire/screening process to ensure we could help her. Upon realising we could help, we scheduled an appointment to go to her home to talk her through her options. One of the biggest challenges we had with this client was that her loan needed to 22
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THE SOLUTION
Upon delving into the client’s complete financial position, my business partner
Since settlement three months ago, this particular client has provided us with four referrals from her immediate network, all of whom have engaged our services, and who we have been able to put in a better financial position. This is a prime example of what is happening in today’s market with the constant influx of developments going on in Sydney, Melbourne and Brisbane. Most people in Sydney are equity-rich, but servicing is the issue. It is imperative that clients engage in a
This scenario is exactly why I began mortgage broking: ... to share the knowledge and experience I have acquired over the years, to put clients in a better position
Damian Brosque Director, You Finances
Adam Moffat and I discovered that we had a client who was screaming for help and felt helpless. She wanted to begin her property investment journey, but she did not want to lose her deposit. In our opinion, the client was a great applicant for only a few specific funders. She had a healthy amount of superannuation, minimal debt outside of her owner-occupied
pre-approval from a nominated funder prior to even looking at a property. Give your client the ammunition to purchase by ensuring the funder will provide the funds required. This scenario is exactly why I began mortgage broking: to be able to share the knowledge and experience I have acquired over the years, to put clients in a better position today and for the future. AB
LENDER UPDATE
LEARNING THE 180-DEGREES WAY We learn from everything we do – not just at work but from life lessons and experiences – and this is something that should be fostered among your staff, writes Cathy Dimarchos, general manager of non-bank lender Sintex
The Sintex Team
At Sintex we have a diverse team, with each member bringing something different to what we do. There are also similarities among the team, namely that each person who works here has pushed themselves outside of their comfort zone in taking on new tasks, achieving the biggest learning curve of their careers. It is challenging, exciting and frightening all at the same time, but the key here is that they were prepared to accept the challenge and take a leap of faith in their teammates, allowing themselves to become vulnerable. This type of trust builds an incredible team. It creates belief in oneself and also facilitates the opportunity for personal growth and professional development. I believe everything and everyone can be taught; there are no ‘specialists’ in life. While some may have experiences that afford them foresight, this does not make them better equipped to manage a job than someone who has passion and dedication and is willing to listen and take on board what is presented to them. Asking questions – the right questions – and being a responsive listener goes a long
way in life and business. So, if you are prepared to walk the ‘pavement’ and make yourself vulnerable, welcome the ‘magic’ that will unfold. ‘Balancing life’ is a cliché that’s often referenced, yet it is a very important aspect of business. I say business because without people we have no business. It’s important to remember that while we have deadlines, customers, targets,
and they deliver. They also know that you have each other’s backs, when and if the need comes, to take care of the most precious thing in life … their family. Most of us have passion and dreams, but we seldom share them, especially with our work colleagues. This is part of our psyche, so ignoring it or allowing it to smoulder slowly is allowing a fire to burn out. It’s important to ensure that
Give [yourself ] time out regularly to feed that passion. By doing this, it provides clarity and serenity service level agreements and everything that revolves around achieving the bottom line that we have set our eye on, it’s the team and each individual that will deliver that. Your team, your staff, our team – all need to know that family comes first, hence the reference to balancing life. When this is known and everyone has peace of mind, the efficiencies increase subconsciously. Each person knows what needs to be done,
we don’t get trapped on that merry-go-round that just keeps spinning, and that we give ourselves time out regularly to feed that passion. By doing this, it provides clarity and serenity. Encourage this among your staff/teams. We have staff members who are passionate about photography, dancing, innovation and technology, animals and fishing, and each of these topics is discussed in the office daily.
Sharing in other people’s interests allows you to see them in a different light, and this extends your relationship. It’s the same with your customers. Remembering their children’s names and the things that are important to them shows that you have listened and that you care about what’s important to them. It is the small things that make a difference. My passion is equality and raising the quality of life of others, especially children. I am also very passionate about the Sintex team and their personal development. For me, it’s imperative that collectively we take on board things that are important to us, including processes that expedite and streamline what we need to do at work, but more so, that we empower each person to guide that change while they engage with key parties. We are all a ‘collective’ in various things we do, and it is important to allow opportunities of magic to enter our lives. In doing so, this may mean that we have to step out of our comfort zones and place trust in others. Explore opportunities and take on feedback to help you be where you want to be, when you want to be there.
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FROM THE FORUM
Top comments from trending stories on brokernews.com.au
ASIC RELEASES REVIEW OF INTEREST-ONLY HOME LOANS
BANK MARGIN PRESSURE ON HORIZON, SAYS REPORT
ASIC’s review of interest-only lending has revealed that borrowers who use brokers are more likely to obtain an interest-only loan than if they go directly to a lender. The “targeted industry surveillance” examined whether lenders and brokers were inappropriately recommending more expensive interest-only loans. ASIC has concluded the first stage of its review, which involved collecting data from 16 home loan providers, including a range of banks and non-bank lenders. The second stage will involve reviewing individual loan files from both lenders and brokers.
Interest-only loans represent a key risk to both banks and borrowers through interest rate repricing, loan switching and mortgagee characteristics, according to Morgan Stanley Research. This may cause higher levels of loan defaults and decreased profits for lenders. Analysts surveyed more than 1,800 mortgage holders for the Crunch Time: Switch and Thrift report. It found that with rates on interest-only loans around 50bps higher than the equivalent P&I products, borrowers were more likely to switch, potentially putting pressure on bank margins.
Interest-only loans have a place in lending. Any accountant will recommend interest-only repayments on investment loans to maximise the negative gearing benefits of the interest for tax purposes. If the client has an owner-occupied home loan then it would be prudent for this to be switched to P&I repayments. FHBs appreciate having interest-only loans initially as they are asked to provide minimal interest payments to the lender, freeing up much-needed to cash to purchase furniture, appliances, etc, for their new home rather than taking out more expensive personal loans/store finance. RH | 11 Oct 2017, 10:37 AM
When will some of this stupidity and the witch-hunt against brokers stop? Where is the long line of borrowers complaining about their broker, as I have never seen it? What about looking into high-interest loans from the likes of big appliance retail stores, 20% rates on credit cards that only require a client to repay about 3% of the debt per month, and pay day lenders? How about looking into the ‘property spruikers’ who run seminars at your local RSL club, who tell everyone they can get them a loan approved for an investment property purchase and say “it is a no-brainer”? They rarely mention any of the risks associated with buying investment property.
Bottom Line | 13 Oct 2017, 09:56 AM
Interest-only loans are a trap for property spruikers to get gullible investors to buy more property and hence more commission. If the aim is to achieve wealth, then P&I loans offer a genuine benefit. There is little difference in the short term between interest only and P&I. If the investor believes the crap that capital gains will continue at the same rate for an investment property in, say, Queensland, where everyone is building investment properties, then they are dreaming. Gullible prospectors are making property spruikers rich. … I am a millionaire through property, but all through P&I loans. I bought well, at the lowest price, and paid off my loans through P&I.
Next a mortgage broker will be responsible for everyone’s spending habits. Who are we to tell a person not to go to the pub and have a parma as it may affect their interest-only loan repayment? Sorry, you can’t buy your smashed avo at the local cafe as interest-only payments are the evil enemy and you won’t be able to afford P&I repayments. Sorry, you can’t go down to the peninsula and spend some time with your family over the holidays as it could change your living expenses and your ability to make a loan repayment. Consumers need to take responsibility for their actions as well. We cannot control everything! We can only go off what the customer tells us. We cannot see into the future. All loan submissions, verification and assessments are based on historical data. The banks build in buffers for I/O repayments and other debts that are fair and reasonable. Interestingly, while this person has had their interest-only investment loan, their wealth has grown, in some circumstances by hundreds of thousands of dollars. Tell me what I have done wrong by these people? ... Instead of slamming brokers, how about congratulating them for the benefit they provide these consumers with competition and choice?
Grahame | 14 Oct 2017, 11:58 AM
N Spacecadet | 16 Oct 2017, 10:09 AM
Kate T | 11 Oct 2017, 11:59 AM
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With all due respect ... there seem to be a lot of statistical external experts who don’t actually write loans or work directly with the public (hence can’t interpret data correctly) that seem to now tell us – daily – that the things that have worked for 60 years are suddenly all going to stop working. E.g. interest only has been around for decades, yet suddenly overnight they’ve become bad. We went through 2007 with interest-only loans and we survived better than any other country. Now suddenly they are considered a disaster. The country and finance sector worked well before we had illinformed “external experts”, and when we had non-invasive government. These groups are the biggest risk to crashing the system/market.
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CAUGHT ON CAMERA About 250 mortgage and insurance brokers, financial advisers and industry representatives attended Suncorp’s business partner summit, Synergy, at the Randwick Racecourse in Sydney on 24 October. The headline event was a panel discussion among three of Suncorp’s CEOs, including Gary Dransfield, CEO of insurance; David Carter, CEO of banking and wealth; and Corinne Glasby, chief risk officer, insurance. The discussion focused on the events impacting the banking and insurance industry locally and globally, future trends in the sector, understanding customer behaviour, and the impact regulatory and other changes are having on intermediaries.
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DATA
WESTERN AUSTRALIA
NSW SPOTLIGHT
Perth’s slow uptick is a welcome relief for WA property agents Premium suburbs in Perth are attracting attention once more, and tenants are filling the vacancies in rentals. In addition, auctions are becoming more active as buyers start capitalising on the bottoming out of the market. “Over the coming six months we should see an increase in buyer activity as continued positive news about the state economy strengthens consumer confidence,” says Travis Coleman, CEO of ACTON. “All these data point to the fact that now is a great time to buy property in WA before the recovery in the economy and the property market gains further momentum.” Real Estate Institute of WA president Hayden Groves confirms that median house prices and rental rates held steady leading up to the August 2017 quarter. Supply levels are also tempering as the number of dwellings on the market decreased by 10% in the same period – this could contribute to growth as demand goes up in the warmer months. Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$500,000
-2.9%
-2.5%
WA Country
H
$330,000
-6.3%
-5.4%
Perth
U
$395,000
-3.7%
-2.1%
WA Country
U
$270,000
-10.4%
-3.4%
SOUTH AUSTRALIA
New construction at the edge of the city offers excellent options for buyers on a budget Charles Tarbey, chairman and owner of Century 21 Australasia, agrees that while SA is not a booming market, it represents short-term stability with potential for long-term growth. “South Australia has not experienced much change in the market, given all of the frantic positive and negative activity around other parts of the country,” he explains. "Nonetheless, the state is always driving to create and accept more industry to attract and retain a greater population base. I believe that it has strong stock levels to accommodate any population growth.” Tarbey believes that, as a whole, SA can be a steady market for long-term investment. Given its present affordability, it’s a good time to capitalise. CoreLogic data shows signs that buyers may be seeing the value of the state’s market, as auction clearance rates have been rising. Area
Type Median value
Quarterly
12-month
growth
growth
GO BEYOND THE SYDNEY METRO
While the Sydney property market is facing a slowdown, opportunities exist in the growth corridors just outside its borders where amenities are aplenty
combination of APRA’s lending changes, tougher servicing calculators, higher interest rates for investors and interest-only loans, and low rental yields should eventually result in investors backing away from the Sydney market, theoretically making it easier for owner-occupiers to get their foot in the door. However, Jane Slack-Smith, director of Investors Choice Mortgages, believes owner-occupiers could have just as difficult a time getting a loan from the bank. “I have doubts that the Sydney market will do little more than limp along for a few years. However, all the indications are that APRA has finished its lending restrictions, having successfully slowed the markets, and the time to the next growth cycle will be shorter, so not long to wait.” In the meantime, Newcastle, the Central Coast and Wollongong are becoming growth corridors in regional NSW. With the improved access via light rail to Sydney, investors are staking a claim in these parts. THE
Amenities drive interest beyond the metro The inner city of Sydney is the top draw for buyers, but the affordability of properties and availability of high-quality amenities are also pushing the apartment market forward in the Northern Beaches and eastern regions. “Decentralised apartment living options are more common in Sydney historically than in other states, perhaps due to the high-quality amenities that extend beyond the CBD and inner suburbs, such as harbourside living, the Northern Beaches, and the Eastern Suburbs’ proximity to the CBD and beaches,” comments Matt Lewison, director at OpenCorp. A consistent shortage of housing contributes to keeping demand high as the population increases. Investors can therefore still make money off low-rise suburban apartments near activity centres. If developers look into constructing larger units that cater to family occupation, this could boost the market even further. AB
H
$450,000
0.0%
2.9%
Median price (houses)
SA Country
H
$285,000
-5.0%
1.8%
$524,317
Adelaide
U
$383,750
5.1%
4.3%
SA Country
U
$205,000
14,4%
2.6%
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After a marathon run of record growth, the Sydney market has cooled in recent months as the impact of tighter regulation trickles through to sales results Across the board, there has been less investor activity in NSW, which has dampened demand in the typically fierce spring market. This is good news for first home buyers who are spurred on by the more generous stamp duty concessions introduced in July and a less competitive environment, particularly at auctions. With tightened regulation and policy changes, we are seeing an ever-increasing plethora of loan products becoming available nationally. This, together with recent changes to the interest-only rates of the major banks, is changing the way Australians view their home loans. Increasingly, we are seeing people actively shopping around with non-major and non-bank lenders in an effort to ensure they are getting the best deal possible. This is something we expect to see more of as attitudes towards traditional lenders continue to shift.
David Hyman Co-founder and managing director, Lendi
SUBURB TO WATCH: TEA GARDENS
Adelaide
26
BROKER PERSPECTIVE
Median price (units) $399,113
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
18,4%
36.8%
56.8%
3.5%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
13.3%
21.6%
27.0%
4.1%
AUSTRALIAN CAPITAL TERRITORY
Canberra’s auction market had a strong showing over the winter, with volumes and clearance rates soaring
OPPORTUNITIES AND KEY INFRASTRUCTURE
Rossmore build
Green Square
Bridge crossing
Affordable housing
Land acquired for new community of 150 homes in southwest Sydney
New streets will prioritise walking and cycling in this fast-growing area
Improved cycleway linking the city to the Harbour Bridge is on the agenda
New initiative will help house young people in studio apartments
HIGHEST-YIELD SUBURBS IN NEW SOUTH WALES Suburb
Type
Median price
Quarterly growth
12-month growth
Broulee
H
$528,100
6%
20%
Broken Hill
H
$110,000
3%
7%
Malua Bay
H
$485,000
-1%
13%
Sussex Inlet
H
$445,000
9%
9%
Gilgandra
H
$142,500
-10%
-19%
The capital city reported an average clearance rate of nearly 70% over the season – the highest since 2009. “The strong clearance rate came from a higher number of auctions, which is another sign of a strong market,” says Andrew Wilson, chief economist at Domain Group. Buyers are also getting used to the idea of buying property via an auction – the process is trusted more than it used to be and is more straightforward. Nonetheless, Wilson expects Canberra’s growth to slow down soon, even if the economy stays strong. “It’s in a little bit of a catch-up mode. I expect that it will start to level out next year. I think we’re seeing that in Sydney now,” he says. For now, Canberra boasts a lively property market with options for all kinds of buyers, including first home buyers, downsizers and upgraders. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$675,500
0.6%
6.5%
Canberra
U
$427,000
-3.2%
2.2%
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27
DATA
QUEENSLAND
When buying in Brisbane, consider established housing, townhouses and new land
CAPITAL CITY AUCTION CLEARANCE RATES
growth
growth
Brisbane
H
$525,000
0.5%
3.0%
QLD Country
H
$433,850
-1.4%
1.8%
Brisbane
U
$407,500
-0.1%
-2.1%
QLD Country
U
$377,000
-2.1%
4.1%
MEDIAN HOUSE AND UNIT PRICES
Demand may overpower the supply of housing across Victoria
$1,000,000
Quarterly
12-month
growth
growth
Melbourne
H
$710,000
1.4%
10.0%
VIC Country
H
$330,000
-2.7%
4.4%
Melbourne
U
$520,000
2.4%
2.7%
VIC Country
U
$260,000
-1.0%
0.0%
28
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Sold
52
Not sold
28
Clearance rate
65.0%
PERTH Total auctions
39
Sold
13
Not sold
8 61.9%
$1,100,000
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$491,500
$320,000
$393,600
$0
$410,000
$100,000
$504,500
$200,000
$330,250
$300,000
$433,750
$500,000 $400,000
$545,000
$700,000 $600,000
$762,000
$800,000
$725,000
$900,000
Houses
$950,000
As housing stock shrinks throughout the state, the Urban Development Institute of Australia (UDIA) in Victoria believes incoming supply may not be enough to cover the demand. “The residential development industry points to a serious housing undersupply. This is cause for major concern from the affordability, liveability and economic perspectives as Victoria’s population only looks to increase on recent projections,” says Danni Addison, CEO of UDIA Victoria. This represents an opportunity for townhouses and units, which are expected to make up the majority of properties in the Victorian housing market. While tenants still aren’t keen on apartments, especially in outer Melbourne, this sentiment could change in the future. One of the suburbs in the spotlight for its affordability is Melton. As an important location in the outer-west region of Victoria, Melton experienced strong growth over the 12 months to August 2017. Houses saw an almost 20% price increase, whereas unit values were boosted by over 10%. Type Median value
126
Clearance rate
VICTORIA
Area
Total auctions
Darwin
Units
$419,000
12-month
ADELAIDE
$640,000
Quarterly
$402,000
Type Median value
Volumes rose across the combined capital cities, with 2,894 auctions held during the week ending 12 November and 66.5% of properties selling. This was an increase from the week prior when the final auction clearance rate fell to its lowest reading since early 2016, when 61.5% of the 2,045 auctions cleared. Clearance rates have continued to track below 70% since June this year. This is a considerably softer trend than what was seen over the same period last year when clearance rates were tracking around the mid-70% range for most of the second half 2016. Results across each of the individual markets were varied this week, with Canberra recording the highest preliminary auction clearance rate of 72.9%, while in Brisbane only 45.7% of auctions cleared.
$527,000
Area
WEEK ENDING 12 NOVEMBER 2017
$362,500
Brisbane will always be attractive to prospective investors because of its low prices and significant rental yields. However, given the supply and other residual economic issues, it’s vital to approach property buying in Brisbane with caution. “There are markets within markets, and there is still opportunity for growth if you buy well in Brisbane,” says Jane Slack-Smith, director of Investors Choice Mortgages. “Country Queensland outperformed all states with the number of regional towns available to invest in that met these criteria: median values between $150,000 and $600,000, a minimum of 5% per annum rental yield, and a minimum of 6% per annum growth in the next eight years.” Upon conducting research using Residex prediction data, Slack-Smith also found that Southeast Queensland is likely to be the focus of interstate migrants from the southern states, therefore investors should keep an eye on this area.
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
-0.2%
-0.6%
4.5%
6.7%
Melbourne
0.0%
0.3%
8.6%
10.5%
Brisbane
0.0%
0.1%
2.3%
2.6%
Adelaide
-0.1%
-0.1%
2.6%
4.1%
Perth
-0.2%
-0.2%
-2.5%
-2.8%
-0.1%
-0.2%
4.8%
6.4%
Sydney
Combined 5 capitals
*The monthly change is the change over the past 28 days
BRISBANE Total auctions
CANBERRA Total auctions
125
Sold
78
Not sold
29
Clearance rate
209
Sold
59
Not sold
70
Clearance rate
45.7%
72.9%
SYDNEY Total auctions
1,089
Sold
504
Not sold
279
Clearance rate
TASMANIA
MELBOURNE Total auctions
64.4%
1,299
Total auctions
7
Sold
783
Sold
2
Not sold
313
Not sold
2
Clearance rate
Clearance rate
71.4%
TASMANIA
Area
Economy bolsters occupier confidence Employment opportunities in Hobart increased by 8% in the year to August 2017, says Simon Pressley, managing director of Propertyology. In the six months to August, Hobart also recorded the greatest increase in median property values of all the capital cities, according to CoreLogic. The annual growth rate in Hobart has not reached such heights since 2004, says Tim Lawless, director of research at CoreLogic. “The sheer affordability of housing is likely one of the key drivers for Hobart’s values appreciation,” he comments. Nonetheless, Hobart’s level of popularity has not spread to other regions in the state, thus Tasmania could be in danger of oversupply.
50.0%
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$380,000
-2.6%
6.2%
TAS Country
H
$268,000
0.4%
1.4%
Hobart
U
$285,500
-9.7%
1.5%
TAS Country
U
$233,000
-6.4%
4.2%
All data sourced from CoreLogic.com.au
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29
PEOPLE
IN THE HOT SEAT Barry Oxley, CEO of Lending Specialists and founder of subaggregation business Loans Actually, reminisces about how far the industry’s come since he started broking in the late ’90s, and ponders what changes are on the horizon Who or what inspired you to become a broker? After the Commonwealth Bank made me redundant in 1998, A I joined forces with a risk insurance adviser, writing loans for his clients. Up until that time, I hadn’t come across too many mortgage brokers and wasn’t aware there was actually a fullf ledged mortgage broking industry. I had always enjoyed writing loans and helping people in my bank roles, so mortgage broking allowed me to continue in a similar vein.
Q
How has the broking industry evolved since you started? Mortgage broking has come a long way since I started in the A late 1990s. Before signing on as PLAN Australia’s first member, my lending panel was limited to three, but it now stands in excess of 60 residential and commercial lenders. From thermal faxes, dial-up internet and handwritten spreadsheets to keep track of the bank’s products, we’ve now advanced to more sophisticated processes. Compliance has also become an important part of our day-to-day routine, with increasing support from aggregators to keep things under check. We should accept and embrace these changes and try to use them to our advantage.
Q
What challenges and changes do you anticipate the industry will encounter in the coming years? There’s rarely a day goes by where something doesn’t change, A and I’m sure technology will continue to improve the way we communicate with both lenders and clients as we strive for quicker, more efficient application processing and conversions to settlement. One of my biggest challenges is keeping up with all these changes, and that’s why it’s so important to be part of a great team. I’m lucky that both my staff at Lending Specialists and my subaggregation team at Loans Actually are all very experienced, and their support is invaluable. I also rely heavily on my aggregator, PLAN Australia, and licensee, BLSSA, to keep me abreast of industry and compliance changes.
Q
What’s something you’re looking forward to in December? Santa arriving on time and the Collingwood Football Club A not losing a game in December (again). From a business point of view – to finish the year off well and set ourselves up for a strong 2018. AB
Q
30
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